Prices
have already risen by more than a third this year, hitting a fresh peak
on Tuesday at $44.24 a barrel, the highest price in the 21-year history
of New York Mercantile Exchange crude futures. Time and again analysts
have called a top to the rally, only for prices to march higher as strong
demand leaves the world supply system with no leeway to cope with potential
disruption in big producers like Iraq, Russia or Venezuela.

And just as a surprise
upsurge in Chinese oil demand has revolutionised the oil market this
year, so it will take a sustained economic or political shift to bring
down prices now, analysts say.

"Getting down
from here will not happen soon and it will not be easy," said energy
economist Philip Verlerger in Aspen, Colorado.

"We need to
see inventories build up and to see inventories build up we either need
a big recession or a really mild winter which will leave us sitting
in piles of heating oil."

NO BEARISH NEWS
IN SIGHT

Fear of attacks
on energy infrastructure by Islamic militants has reinforced oil's rise,
encouraging heavy buying from big-money funds who stand to make big
profits if prices spike yet higher.

Most producers in
the OPEC cartel are already pumping at capacity, so there is no chance
of a sudden wash of extra supply to deflate the market. And it will
take years for exploration projects viable at today's prices to turn
into new production.

"Without any
significant bearish news on the horizon and crude demand close to its
peak for the year, speculators will have the opportunity to continue
to push for new highs in the weeks ahead," said a report by PFC
Energy.

It may be that the
only way to douse the oil rally will be for prices to rise so high that
they turn boom into bust.

So far the jump
in energy costs appears to have done little to hurt global economic
growth, with China's expansion slowing only slightly and the United
States posting solid growth.

But economists warn
that oil prices are now approaching the sort of level that will stifle
global growth and in turn stunt fuel demand.

"There will
be the delayed effect of oil prices on demand. It takes time but it
does happen and people forget about it at their peril," said Leo
Drollas of the Centre for Global Energy Studies in London.

Allowing for inflation,
prices are near the level hit during the 1973 oil embargo and just over
half those during the oil price shock that followed the 1979 Iranian
revolution. Both those oil shocks sent the world economy into recession.

"While so far
the world economy has pretty much shrugged off oil at $40 per barrel,
a sustained rise over $50 probably would take oil prices into the range
where they would have a noticeable impact on activity," said Barclays
Capital in a report.

WILD CARDS

One other wild card
that might help lower prices would be a change in U.S. president come
November's election.

This is due not
so much to Democratic nominee Sen. John Kerry's drive to promote alternative
energy as because he is seen by some as less likely than incumbent George
W. Bush to become embroiled in military action in the Middle East.

"If the U.S.
is less likely to go to war over oil, then a lot of this fear premium
should disappear," said a European crude oil trader.

But that possibility
is still overshadowed by the potential impact of a major supply disruption,
even though such an event would quickly be countered by a release in
consuming countries' strategic stocks.

Verleger, for example,
posits the prospect that Iranian crude exports may be disrupted as part
of the fallout from its wrangle with the U.N. over Tehran's nuclear
programme.

"All Iran has
to do to push prices to $60, $70 or $80 a barrel is announce an export
cut to retaliate against any Security Council resolution," Verleger
said.

A hypothesis perhaps,
but still typical of concerns for oil buyers who see a market stretched
to the limit and are prepared to pay up to ensure supplies.

"Getting prices
down will need a change in the psychology of the forward buyer,"
Verleger said.